A process to estimate the value of a company based on operational performance metrics
The results of this research are the definition of a problem type and the development of a new business valuation process. The problem structure has as inputs industry specific performance metrics grouped into three primary areas Production Processes, Products/Services and Marketability and Management, a fuzzy logic model with fuzzy and approximate relationships between performance metrics and financial information and crisp financial information as output. The framework for a fuzzy logic model was developed and is used to approximate relationships and model a non-linear environment. The resulting crisp financial information is then input and integrated into the traditional business valuation process.
The process was demonstrated with an example production company and with data from two regional airlines. A step-by-step example of the process was provided using the production company example to demonstrate how the results are generated and integrated with DCF business valuation. Heuristics to identify areas to improve company performance were described. Two regional airlines, individually and combined, were tested with actual data using the original fuzzy logic model structure and then the original fuzzy logic model structure was revised and new results generated. Tuning the model showed an improvement in the business valuation process performance. The benefits from this research include the definition of a new class of problems and a process to solve problems of this nature. The insights gained from this research can be applied in major disciplines such as accounting, business and finance, engineering and decision theory.
School:Kansas State University
School Location:USA - Kansas
Source Type:Master's Thesis
Keywords:business valuation performance metrics fuzzy logic multiple attribute decision making operational corporate value engineering industrial 0546 administration management 0454
Date of Publication:01/01/2005